AutoSave OFF OFF A SU Documents a Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments Times New... v v 12 y All code A A Aa A ADA Anklede AalbCcDc AaBECCDH E AaBb Masbe De AaBbcente Pagic BU X == Normal No Spacing Heading 1 Heading 2 Title Bubtitle Bubile Eman... Dictate Styles Pane 1. Two investments (A and B, below) have been proposed to the Capital Investment committee of your organization; a. The required rate of rotum for your company is 6%. What is the NPV for each investment? b. What is the payback period for each investment? c. Which investerenl would you recommend and why? Year o Yeer 1 Year 2 Year 3 Year 1 Year 5 Irreement A Required Rate of Retum Fanatis S 150,000 $10,000 $10,000 $10,000 $10,000 $10,000 $ $1,000 $55,000 $35,000 $21,000 $200,000 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Investment B Required Rate of Ratum Casts: Benefits: S80,000 S $ 45,000 $15,000 $10,000 $10,000 $ 15,000 Unfortunately, the Capital Investment Curmurruttee refused to approve your recommendation (from above) since you did not consider the uncertainty inherent in these types of investments Repeat your analysis, this time using Crystal Bull and the following information. What is the probability of meeting the NPV for the investments? Investment A: i. Year 0 Investment cost: Triangular distribution (optimistic: $125,000); most likely: $150,000 pessimistic: 75,000) ii. Year 1-5 operating cost: Normal distribution (mean of $10.000, standard deviation of $2,000) iii. Year 1 Benefits: Normal distribution (mean of $90,000, standard deviation of $20,000) iv. Year 2 Benefits: Normal distribution (mean of $55,000, standard deviation of $15,000) v. Year 3 Benefits: Normal distribution (mcan of $35,000), standard deviation of $10,000) vi. Year 4 Benefits: Normal distribution (hean of $20,000, standard deviation of $5000) vii. Year 5 Benefits: Normal distribution (mean of $20,000, standard deviation of $5000) Pagn 1 of 2 277 words English (United States) Focus + 122% AutoSave OFF OFF A SU Documents a Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments y EEE 24 Times New... v v 12 A A Aa A BU X X ADA All code Anklede AaBbcDc AaBECODE: AaBb Masbe De AaBbcente Pagic Normal No Spacing Heading Heading 2 Title Bubtitle Bubile Eman... Dictate Styles Pare Iepal ou analysis, uns come my SI AI and I HUWmg much. YLISTIC probability of meeting the NPV for the investments? Tnvestment A: i. Year O Investment cost: Triangular distribution (optimistic: S125.000; most likely: $150.000; pessimistic: $175,000) ii. Year 1-5 operating cost: Normal distribution (mean of $10,000, standard deviation of $2,000) iii. Year 1 Benefits: Normal distribution (mcan of $90,000), standard deviation of $20,000) iv. Year 2 Renefits: Normal distribution (mean of $55,000, standard deviation of $15,000) v. Year 3 Benefits: Normal distribution (mean of $35,000, standard deviation of $10,000) vi. Year 4 Benefits: Normal distribution (mean of $20,000, standard deviation of $50XX)) vii. Year 5 Benetits: Normal distribution (mean of $20,000), standard deviation of $50XX) Investment B i. Year O Investment cost: Triangular distribution (optimistic: $75,000; most likely: $80,000; pessimistic: $95.000) ii. Year 1 Benefits: Normal distribution (mean of $45,000, standard deviation of $20,000) iii. Year 2 Benefits: Normal distribution (mcan of $15,000, standard deviation of $5,000) iv. Year 3 Benefits: Normal distribution (mean of $10,000, standard deviation of $3,000) v. Year 4 Benefits: Normal distribution (mean of $10,000, standard deviation of S3,000) vi. Year 5 Beratit: Normal distribution (mcan of $15,000, standard deviation of $5,000) Pagn 1 of 2 277 words English (United States) Focus + 122% AutoSave OFF OFF A SU Documents a Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments Times New... v v 12 y All code A A Aa A ADA Anklede AalbCcDc AaBECCDH E AaBb Masbe De AaBbcente Pagic BU X == Normal No Spacing Heading 1 Heading 2 Title Bubtitle Bubile Eman... Dictate Styles Pane 1. Two investments (A and B, below) have been proposed to the Capital Investment committee of your organization; a. The required rate of rotum for your company is 6%. What is the NPV for each investment? b. What is the payback period for each investment? c. Which investerenl would you recommend and why? Year o Yeer 1 Year 2 Year 3 Year 1 Year 5 Irreement A Required Rate of Retum Fanatis S 150,000 $10,000 $10,000 $10,000 $10,000 $10,000 $ $1,000 $55,000 $35,000 $21,000 $200,000 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Investment B Required Rate of Ratum Casts: Benefits: S80,000 S $ 45,000 $15,000 $10,000 $10,000 $ 15,000 Unfortunately, the Capital Investment Curmurruttee refused to approve your recommendation (from above) since you did not consider the uncertainty inherent in these types of investments Repeat your analysis, this time using Crystal Bull and the following information. What is the probability of meeting the NPV for the investments? Investment A: i. Year 0 Investment cost: Triangular distribution (optimistic: $125,000); most likely: $150,000 pessimistic: 75,000) ii. Year 1-5 operating cost: Normal distribution (mean of $10.000, standard deviation of $2,000) iii. Year 1 Benefits: Normal distribution (mean of $90,000, standard deviation of $20,000) iv. Year 2 Benefits: Normal distribution (mean of $55,000, standard deviation of $15,000) v. Year 3 Benefits: Normal distribution (mcan of $35,000), standard deviation of $10,000) vi. Year 4 Benefits: Normal distribution (hean of $20,000, standard deviation of $5000) vii. Year 5 Benefits: Normal distribution (mean of $20,000, standard deviation of $5000) Pagn 1 of 2 277 words English (United States) Focus + 122% AutoSave OFF OFF A SU Documents a Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments y EEE 24 Times New... v v 12 A A Aa A BU X X ADA All code Anklede AaBbcDc AaBECODE: AaBb Masbe De AaBbcente Pagic Normal No Spacing Heading Heading 2 Title Bubtitle Bubile Eman... Dictate Styles Pare Iepal ou analysis, uns come my SI AI and I HUWmg much. YLISTIC probability of meeting the NPV for the investments? Tnvestment A: i. Year O Investment cost: Triangular distribution (optimistic: S125.000; most likely: $150.000; pessimistic: $175,000) ii. Year 1-5 operating cost: Normal distribution (mean of $10,000, standard deviation of $2,000) iii. Year 1 Benefits: Normal distribution (mcan of $90,000), standard deviation of $20,000) iv. Year 2 Renefits: Normal distribution (mean of $55,000, standard deviation of $15,000) v. Year 3 Benefits: Normal distribution (mean of $35,000, standard deviation of $10,000) vi. Year 4 Benefits: Normal distribution (mean of $20,000, standard deviation of $50XX)) vii. Year 5 Benetits: Normal distribution (mean of $20,000), standard deviation of $50XX) Investment B i. Year O Investment cost: Triangular distribution (optimistic: $75,000; most likely: $80,000; pessimistic: $95.000) ii. Year 1 Benefits: Normal distribution (mean of $45,000, standard deviation of $20,000) iii. Year 2 Benefits: Normal distribution (mcan of $15,000, standard deviation of $5,000) iv. Year 3 Benefits: Normal distribution (mean of $10,000, standard deviation of $3,000) v. Year 4 Benefits: Normal distribution (mean of $10,000, standard deviation of S3,000) vi. Year 5 Beratit: Normal distribution (mcan of $15,000, standard deviation of $5,000) Pagn 1 of 2 277 words English (United States) Focus + 122%